Ritam Gandhi, CEO and Founder of Studio Graphene tells us why UK startups will survive if they are supported by the government after a sweeping loss of confidence damages the startup economy.
The coronavirus has thrown a significant curveball at UK businesses who were already facing up to the challenge of navigating a complicated Brexit transition. As a business leader myself, I sympathise with those who are facing prospects of stalled sales and disrupted supply chains. Early signs do not look overwhelmingly positive for the private sector, and in particular for fledgling businesses who have smaller cash reserves to fall back on.
The task ahead is certainly complex, but we must remind ourselves of the resilience that UK businesses have shown in the face of adversity. From the 2008 financial crisis to the EU Referendum, the private sector has faced its fair share of obstacles. And every time, it has made the most out of a bad situation and found ways to adapt.
That said, the nation’s startups cannot go it alone. The Government must prioritise supporting the small businesses that are the heart blood of the economy if we are to emerge from this crisis victorious – even if it means making sacrifices to do it.
What the research tells us about UK Startups
At the end of March 2020, Studio Graphene surveyed over 100 UK tech startups to uncover their confidence levels. Indeed, having launched the quarterly Tech Tracker Survey in March 2019, Studio Graphene has closely monitored how businesses have responded to changing political and economic conditions – with the latest data revealing just how damaging coronavirus has been to business confidence.
The glaring takeaway from the results of the latest survey is the noticeable drop in confidence levels; over a third (38%) of UK startups (tech) said they are either ‘not confident’ or ‘not confident at all’ that their business’ turnover will grow in the year ahead. This is up from a mere 4% who said the same thing 12 months before.
When quizzed about their plans for the coming year, only 58% said they are planning to hire more staff (a 33% drop from the same time last year), and half (49%) said they are hoping to expand into new territories outside of the UK – an annual drop of 18%.
Elsewhere, startups’ faith in the UK Government’s ability to help them through this crisis is low. In fact, an overwhelming majority (69%) doubt the Government’s ability to support UK tech businesses through the pandemic.
Can UK startups survive?
The Government has provided a safety net for firms in the short-term – but this net does not necessarily extend to many of the companies who need it most. The Chancellor was fast to act by introducing business rates relief and financial support for furloughed staff, as well as government-backed financial support through the Coronavirus Business Interruption Loan Scheme (CBILS).
While admirable, these efforts still fall short of offering comprehensive protection, and have quickly come under fire; loss-making businesses, such as startups, which first need to spend money before they can become profitable, are not covered by the CBILS at the time of writing. Meanwhile, small businesses are finding it difficult to access loans from their banks due to excessive red tape.
Once these problems are remedied, I have every faith that the UK’s innovative businesses will remain resilient and find ways to see light in the darkness. Through the helping hand of technology, many are already adapting their operations and taking advantage of opportunities they could not have foreseen.
Food and drink distributors have manoeuvred their business model to supply consumers rather than shops and restaurants, fitness classes and events have shifted online, and mobile apps have been developed to help us monitor the virus and its symptoms. These are just a few examples of the multitude of ways that technology is enabling businesses to make the most of a difficult situation and find ways of adapting to, and even embracing, the changes. Readily available technologies have already allowed many companies to pursue new routes to market and recover some of the losses they have experienced.
Nobody knows how long the virus will last, or how long its repercussions will be felt throughout the economy. But if the Government bolsters its support for UK businesses, and firms leverage the tech tools at hand which could offer them a lifeline, then we will successfully emerge from the crisis in a strong position.